Litmus Pte Ltd is a distributor and retailer of traditional push scooters in Singapore. During the year, the company expanded its product line to include electric bicycles (eBike) sourced from external distributors. With the recent ban on electric scooters (eScooters) on footpaths, the company expects eBikes sales to increase steadily in the next 2 years. The Board is hence studying the feasibility of establishing its own production facility in Vietnam, where cost of production is lower.

Before venturing abroad, the Board needs to address the issue of falling profitability of its current product line. The following table provides the details of sales by product type:

Push scooter Sales (units) 5,000 Selling price per unit 5 120 Variable cost per unit 5 30 5 Revenue 600,000 Variable costs (150,000) Contribution margin Net profit before tax Ebike- Standard 1,800 600 S 250 S Ebike - Luxe 500 800 350 1,030,000 (450,000) 400,000 (175,000) Total 7,300 $ 2,030,000 (775,000) 1,305,000 150,000